Why saying sorry is so difficult

Thomas Cook have found themselves in a furore over the death of two children at a hotel in Corfu. Their real sin – in the eyes of the parents and the tabloid press – seems to have been that they did not express much contrition at the time and have steadfastly refused to apologise since then. The fact that they received a substantial pay-out from the hotel to cover damage to their reputation and PR expenses has, quite understandably, just added to fuel to the fire.

At the time of the incident in Corfu, Thomas Cook was in the hands of an arrogant and incompetent management who were running the company into near bankruptcy and awarding themselves ever-increasing salaries and bonuses. Their poor behaviour in this case was simply part of an overall malaise in the company. These people departed a long time ago and the person brought in to bring the group back into shape has also left which, if judged by the stockmarket’s reaction, was a very positive move. The company is now, finally, in more sensible hands but the new management will really have their work cut out to rescue this particular situation.

The standard PR advice when a company is involved in an event where people are killed or injured is that the CEO should make a full and frank statement of contrition. CEO’s are human too; they have wives and children and have not set out to hurt their customers. In many cases, they will be genuinely shocked and upset at what has happened.

However, despite the PR advice, they will be firmly told by their company lawyers that they must not say anything that could be seen as accepting even a tiny bit of liability. The company’s insurers will probably back this up with a threat to suspend cover if the CEO says anything remotely prejudicial to a possible legal case.

In many instances, a CEO is tied. He knows what he should say – and probably want to say – but cannot.

I was actually rather shocked at the reaction of the CEO of Lufthansa to the Germanwings crash. Within days of the accident, and well before even a preliminary report had been prepared by official investigators, he appeared to be accepting some of the blame. In one way, his reaction was spot-on – it was quite clearly honest and heart-felt. He was as shocked and upset as anyone. The company’s sensitive behaviour was almost a text book example of how to behave in such an event. But had he cleared his comments with his insurers or did he just feel it was worth the risk?

Thomas Cook will have to pay for the sins of their previous management but properly-managed, honest companies have a huge problem balancing the opposing demands of their PR advisers and their insurers.

Pure genius from Cyprus Airways

So, let’s just say your airline lost $77 million last year and the government is not allowed to lend any more money, having already maybe broken EU rules on government support, what do you do?

Well, a pretty obvious suggestion is to sell one of the two pairs of slots you have at Heathrow.

Indeed, that is just what Cyprus Airways almost did. Using a broker, they managed to put together a rather generous deal with Qatar Airways that valued the slots at $20 million. Unfortunately, members of the government were so anxious to boast of their skill in arranging the deal, they gave interviews to the local television and mentioned the price. This was before the deal was signed and broke a strict confidentiality agreement. Since the price was on the high side, it looks as if another cash-strapped airline has approached Qatar with a better offer and the deal is now off.

The government was boasting that the hefty price would have kept the airline in liquidity until the summer.

Now, it will have to be seen what tricks the inept government Ministers can come up with to keep the airline in business.

Cyprus – the other problem

Many of the recent news stories about Cyprus have referred to it as a “holiday island”. That might be how others regard it but, as we now know, the country itself had much greater ambitions. The idea of being an international financial centre for the Eastern Mediterranean made sense, and could still work but they were too greedy and went for the easy option by building the business on the basis of not asking awkward questions. Trying to be both part of the EU and an off-shore financial centre was a pretty doubtful move. You can’t be both in a club and try to make money by helping citizens from other members circumvent the rules of their home country. Attracting huge amounts of questionable cash and then investing so much of it in just one country (Greece) was spectacularly stupid – did none of their bankers ever learn about “asset distribution”?. The plan worked for a while but its ultimate failure was always likely and hastened by appalling incompetence.

Whilst all this was happening, the country took its eye off its major income-earner. Astonishingly, tourist arrivals have actually fallen in the last ten years. With easy money to be earned elsewhere, the government seems to have let tourism drift. Compare this to Dubai, which also has ambitions to be an international financial centre – there, tourism has been developed every bit as aggressively as its other businesses.

A revival in tourism has been one of the few bright spots in Greece in the last year but it is much harder to see that happening in Cyprus. It has gained a reputation for being expensive and offering questionable quality for the prices charged. The country also lacks a proper image – the distance from much of Europe means it is unlikely to succeed at the lower-end of the market but its efforts to promote itself as a luxury destination have been unconvincing.

One of the major problems has been a lack of cheap flights. The government has always been at pains to protect the ailing Cyprus Airways and has been very reluctant to embrace the budget carriers and the subsidies they require. Now, Cyprus Airlines is in a worse financial state than ever and faces a potentially devastating enquiry by the EU into illegal state subsidies and loans. The initial evidence appears pretty clear-cut and the amounts involved are large. It is hard to see how the airline could continue if it were made to pay back even some of the money under investigation.

Now, Cyprus desperately needs its tourism business and it is going to be an uphill fight to get back all the lost ground.


As one fiscal cliffhanger fades…

The US might have escaped the fiscal cliff – at least for a couple of months – but there are quite a few businesses entering 2013 in rather poor shape.

The US hotel industry is actually doing pretty well at the moment but an astonishing 25% of all US hotels were in default on their mortgage payments at the end of 2012. In many cases, the hotels are trading profitably and are perfectly sound businesses but the owners got themselves into trouble with over-ambitious loans at the height of the soft credit boom.

Unfortunately, even successful hotels that are in this position are likely to find themselves being starved of cash for anything other than minor repairs. Replacement of items such as televisions, beds and any more major refurbishment can be put on hold indefinitely while the owners and the banks work out their problems.

Hotels in major US cities are not cheap and you do not want to find yourself paying top dollar for a hotel that is having to scrimp. Our advice is to forget past reputations but look carefully at the most up-to-date reviews and avoid any hotel where there are any suggestions that costs are being trimmed or rooms are looking dowdy.

Meanwhile, it is hardly a surprise to see that LodgeNet has just filed for Chapter Eleven bankruptcy protection. You might not know the name but if you have stayed in any Marriott, Hilton or countless other chain hotels, you will have been offered their services – often rather aggressively. The company was the major supplier of in-room television and internet services to hotels and failed to see that its business model (selling premium sports programmes and soft-porn films) was doomed as guests switched to using their own devices for films and television.

The dangers of using flash-sale sites

To be honest, we were not very surprised to see that the flash-sale company, Travesse, has been put into administration. We told readers on a couple of occasions that the site was not one of the better luxury hotel discount sites because their rates were often uncompetitive. We also said that we were not very enthusiastic about the company itself – they seemed to be growing too fast and gave only the most limited information about their background on the website. 

The flash-sale business is very competitive and there are clearly too many companies in the market. However, the public are not fools – if they see a company offering good rates, it will get support and as long as those rates are not being achieved through negative margins, then the company should survive. Travesee was never likely to succeed because it did not have deals good enough to encourage business. It is also quite likely that a few people were put off by the company’s reluctance to show its background and physical location.

Travesse did some business selling “reader offers” through various publications such as Conde Nast Traveller. Presumably that publication had different views to us on the value of Travesse’s offers and the security of the company. Turning up at a luxury hotel to be told that you do not have a reservation because the agent has not paid previous bills would be bad enough but if you had booked through a reader offer promoted by a specialist travel magazine, you might feel somewhat aggrieved.